PLAYERS in the Banking Arena

•Public Sector Banks- SBI, Indian, PNB

Larger Network, Larger Manpower, good growth rate, selective channels,
average productivity

•Old Private sector Banks- Federal, KVB, LVB

Limited Network, Medium Manpower, fair growth , limited channels,
medium productivity

•New Private Sector Banks- HDFC, ICICI, IDBI

•Growing Network, faster growth, high productivity, partnership with third
parties

•Foreign Banks- HSBC, SCB, Citi

Limited Network, Partnership with third parties, Lesser Manpower, higher
productivity, faster growth rate, all channels,
 Changes in Banking Scenario

• Sellers’ Market to Buyers’s market

• Institutional to Universal Banking to Niche
Banking
• Corporates move into Capital Market
• Hotting Competition in SME /EC Market
• Exploring Retail Market
• Experimentation with fee based income / value
added services
• Delivery thro’ multiple channels
 Past vs Present/ Future Banking
Past Banking Present/ Future Banking

Market Place Confined Unlimited

Competition Banks Brands
between
Product One for all- limited One for each- extensive

Delivery channel Single Multiple

Revenue thro’ Margin Fees/ Value added

services
Focus on Business Growth Revenue increase, cost
decrease
Presence of Physical Not needed, E-Banking
Customer
 Milestones in Banking
•Regulatory control by RBI
•Banking Sector Reforms (Narasimham)
•Standards of disclosure
•Capital requirements- Basle
•Alignment of Indian to International
Standards
•Provisioning norms
•Risk based control
 Forces shaping banking sector

Indian banks are facing substantial competitive pressures as banking

landscape gets redefined

Availability of risk E-Business Deregulation

management
Privatisation /
products like
corporatisation / IPO’s
derivatives BANKS
Consolidation /
Managing asset Increasing M & A
quality, NPA activity
Improving Greater managerial
productivity autonomy to banks
Increasing Basel-II
financial requirements,
disclosure income
requirements and recognition and
credit rating provisioning
requirements for standards
banks
 New Business Initiatives

• Changing customer profiles

• Increasing demands by Customer Infrastructure • Technology upgradation
Relationship Support triggering need for
customers Management
redesigned processes
• Higher expectations of
service quality especially • Increase effectiveness of
Product /
for ‘anytime, anywhere’ the HR function
Service
banking Dvpt

• Increased focus on retail banking

• Tie-ups with financial institutions to market
third party products
• Foray into merchant banking
 Key Banking Technology Aspects
“The winners will be those institutions that tie their technology to their
strategies in order to meet their challenges.”

Customer Cost
• Reaching Customers • Cutting Cost thro’ Integration
Faster • Better Information Management
• Managing Diverse
Competition
Needs
• Competitive Edge
Key Banking in its Strategic
Technology Aspects Group

Performance & Evaluation

• Better Metrics to Benchmark
Risk Management
Against Complexities
• Objective Evaluation Process •Easier Risk Identification
•Easier to Assess Risks
Importance of Core Banking Solution
 Faster Response to Customer Demands

 Allows Faster New Product Developments

 CBS Architecture Allows for Existing Products to be Quickly

Customized

 Online Validation of Data – at the Time of Entry

 Independent from the Organization Structure and Supports the

four Primary Entities – Customer, Account, Product and Business
Organization

 Runs in Real Time Update Mode

RISKS associated with BANKING
• Strategic Risk
• Operational Risk
• People Risk
• Credit Risk
• Market Risk
• Financial Risk
• Interest rate Risk
• Maturity Risk
• Information Risk
 Changes in the Banking Environment

• Changing Delivery Channels

• Changes in Core Banking Solutions

• Changes in Support Functions

CHANGING DELIVERY CHANNELS
• Post Office
• Internet
• Tele-Marketing
• Branch
• Third Party
• ATMs
• Point of Sale
• Sales Force
• Call Centre
 CHANGES IN CORE BANKING SOLUTION

Product Management Operations

• Marketing products • Process & Maintain
• Develop products Accounts
• Maintain • Money transactions
• Review portfolios • Comply with
• Modify products Regulations- KYC,
AML, Risk
• Study competition provisioning
 CHANGES IN SUPPORT FUNCTIONS
• Asset Recovery- DRT, SARFAESI
• Manage Fixed Assets
• Finance and Accounting
• Treasury Operations – Domestic , FX
• IT – support innovations
• Risk Management
• HR – Recruitment, Training and retention
• Audit – Risk Based Audit, Sampling
 CHALLENGES IN FUTURE

• Increased Competition and Customer Retention- CRM

• Reduction in Customer Response time
• Complexity of Business
• Highly demanding Customer- CRM, Product Innovation, Mobile
Banking, Anywhere Bkg, Internet based Banking
• Increase level of efficiency & productivity- HR Culture, skills/
knowledge improvement
• Process – Outsourcing
• Lending Long-term – skill set & ALM
• Increased Technology- RTGS, Core Banking Solution, INFINET
(Indian Financial Network)
• Security of Data
 FUTURE OF BANKING
• Re-structuring and Re-positioning
• Mergers and Acquisitions and Takeovers
• Regulatory Supervision / Intervention
• Financial Supply Chain Management
• Outsourcing of non-core activities
• In-sourcing of Cash / Receivables Management
• Management of Asset quality…..
BUT
Banks will continue to manage liquidity, create
& sustain trust and manage risk.